Prior studies on the inequality–happiness link have yielded mixed results and tend to focus on mechanisms that explain the negative effects of inequality. The current study investigated the inequality–happiness link in China and examined hope as a mechanism that explains positive effects of income inequality. Using data from a large sample of 30,255 Chinese respondents, greater inequality was associated with higher life satisfaction in rural China but not significantly associated with life satisfaction in urban China. The positive inequality–happiness link in rural areas was mediated by hope. By providing evidence for a mechanism through which income inequality can lead to greater well-being, the current study sheds light on the heterogeneity of prior findings on the inequality–happiness link. These results supported a dual-process model of income inequality in which inequality leads to higher or lower subjective well-being through hope and social comparison depending on stages of economic development.
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